The Foundation for Taxpayer and Consumer Rights (FTCR)
today exposed internal oil company memos that show how the industry intentionally
reduced domestic refining capacity to drive up profits, RAW STORY has learned.

The three internal
memos from Mobil, Chevron and Texaco illustrate how the oil juggernauts
reduced refining capacity and drove independent refiners out of business
in an effort to increase prices. The highly confidential memos reveal a
nationwide effort by American Petroleum Institute, the lobbying and research
arm of the oil industry, to encourage major refiners to close their refineries
in the mid-1990s.

"Large oil companies have for a decade artificially
shorted the gasoline market to drive up prices," said FTCR president
Jamie Court, who successfully fought to keep Shell Oil from needlessly closing
its Bakersfield, California refinery this year. "Oil companies know they
can make more money by making less gasoline. Katrina should be a wakeup call
to America that the refiners profit widely when they keep the system running
on empty."

"It's now obvious to most Americans that we have
a refinery shortage," said petroleum consultant Tim Hamilton, who authored
a recent report
about oil company price gouging for FTCR. "To point to the environmental
laws as the cause simply misses the fact that it was the major oil companies,
not the environmental groups, that used the regulatory process to create
artificial shortages and limit competition."

The memos from Mobil, Chevron and Texaco show the following.

-- An internal 1996
memorandum from Mobil demonstrates the oil company's successful strategies
to keep smaller refiner Powerine from reopening its California refinery.
The document makes it clear that much of the hardships created by California's
regulations governing refineries came at the urging of the major oil companies
and not the environmental organizations blamed by the industry. The other
alternative plan discussed in the event Powerine did open the refinery was
"....buying all their avails and marketing it ourselves" to insure
the lower price fuel didn't get into the market.

-- An internal Chevron
memo states; "A senior energy analyst at the recent API convention
warned that if the US petroleum industry doesn't reduce its refining capacity
it will never see any substantial increase in refinery margins."

-- The
Texaco memo disclosed how the industry believed in the mid-1990s that
"the most critical factor facing the refining industry on the West
Coast is the surplus of refining capacity, and the surplus gasoline production
capacity. (The same situation exists for the entire U.S. refining industry.)
Supply significantly exceeds demand year-round. This results in very poor
refinery margins and very poor refinery financial results. Significant events
need to occur to assist in reducing supplies and/or increasing the demand
for gasoline. One example of a significant event would be the elimination
of mandates for oxygenate addition to gasoline. Given a choice, oxygenate
usage would go down, and gasoline supplies would go down accordingly. (Much
effort is being exerted to see this happen in the Pacific Northwest.)"
As a result of such pressure, Washington State eliminated the ethanol mandate
- requiring greater quantities of refined supply to fill the gasoline volume
occupied by ethanol.

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